Half of US States Say Obama’s Clean Power Plan Poses Overbearing Rules

Measuring the blow to the Obama Administration

The Supreme Court’s decision to place a hold on US President Barack Obama’s Clean Power Plan is considered a huge blow to the White House, which has expressed disagreement with the court’s decision and has stated that the act will ultimately still be implemented in the future.

Petitioners from West Virginia and Texas have called the environmentally minded clean power plan the most “far-reaching” and “burdensome” act ever “forced onto the states.”

Meanwhile, the court’s stay may revive pure-play coal companies, which have been racing toward rock bottom over the past couple of months. Utilities that use high amounts of coal have thus gotten a momentary breather, as now they have a little more time to adhere to the emission reduction plan’s targets. The graph below shows the stock price correction that major coal players have witnessed since the announcement of Clean Power Plan on August 3, 2015.

Half of US States Say Obama’s Clean Power Plan Poses Overbearing Rules

Benefit to utilities

According to the EPA (US Environmental Protection Agency), power plants are major contributors to large-scale carbon dioxide emission and rising levels of airborne carbon in the US. Studies by the EPA and other non-government groups have found that coal-powered plants account for nearly 33% of greenhouse gas emission. As the most polluting fuel, coal contributes nearly 32% of carbon dioxide emitted into the atmosphere each year.

Meanwhile, many utilities have started switching from coal to natural gas and renewables, but converting existing coal-fired power plants to gas-fired ones require heavy capital expenditure, and developing renewable assets is also a capital-intensive task. Utilities (JXI) have thus been resisting the transition, and so the Supreme Court’s stay on the Clean Power Plan offers them flexibility and time.

Acquisitions on the horizon

Southern Company’s (SO) acquisition of AGL Resources (GAS) last year is a move that will give it better access to natural gas (UNG). With this acquisition, SO aims to increase its natural gas usage by 15 percentage points in its fuel mix by 2020. Similarly, Duke Energy’s (DUK) acquisition of Piedmont Natural Gas (PNY) is aimed to get better access to natural gas supplies. Duke Energy is also shifting its generation from coal (KOL) to natural gas.